The Enterprise System Spectator

Friday, April 09, 2010

Plex Online: pure SaaS for manufacturing

As software-as-a-service (SaaS) providers continue to prosper against traditional on-premise enterprise software vendors, I've been frustrated by the lack of SaaS solutions for manufacturing companies. There are a number of SaaS providers of CRM solutions, HRM and other point solutions, of course, that can work for manufacturing firms. But where is there a complete ERP, deployed as SaaS, for manufacturing operations?

Let's look at some possibilities:

NetSuite is true SaaS, but not a fit for most manufacturing companies, as by NetSuite's own admission, it targets services businesses and lacks many fundamental features for manufacturers such as standard costing, shop scheduling, capacity planning, and MRP. (A promising start-up, Rootstock, is building extended manufacturing functionality on top of NetSuite's platform, but it is a new effort and only now being rolled out beyond its initial beta customers).

Workday is another true SaaS provider, with ambitions to be a full ERP replacement. But like NetSuite, Workday will not target manufacturing companies. Today, Workday only offers HRM and some financial systems functionality.

The on-premise ERP industry leader, SAP, has its Business ByDesign (BBD) offering, which has been stuck in beta for years. But like NetSuite, BBD is not targeting manufacturing companies. Furthermore, its initial deployment was as a single-tenant system (a separate instance of BBD for each customer), not a true multi-tenant SaaS offering, which services many customers on a single instance.

Other on-premise ERP providers, such as Oracle, Microsoft, Lawson, IFS, and so on, are missing-in-action when it comes to SaaS for manufacturing. The most they offer are hosted versions of their on-premise software, like Lawson does. When they do offer true SaaS, it is only for niche functionality, such as CRM, as an adjunct to their on-premise software.

To my knowledge, there is only one true SaaS provider that offers a complete ERP solution today for manufacturing companies, and that is Plex Online, from Plex Systems.

Plex's PR folks have been after me for a long time to give me a briefing. I finally took some time today and spoke by phone with Mark Symonds, Plex's President and CEO. Here are some of the key points from our discussion.

Why so few SaaS solutions for manufacturing?I asked Mark, why there are so few complete SaaS solutions for manufacturing firms? He responded that he wished there were more, as it would validate the delivery model Plex provides. He also indicated the difficulty for traditional on-premise vendors, those that have the domain knowledge, to transition to SaaS. It's not easy to completely rearchitect an on-premise solution to a multi-tenant model. In addition, giving up the initial license fee model for a subscription model, which usually goes with SaaS, is a financial disincentive for the on-premise providers to make the switch.

Plex was fortunate, however, in that when they first re-architected their formerly on-premise system to SaaS, they were able to keep new customers paying up front license fees. This allowed them to fund their development, until Plex converted to a subscription model a few years ago.

What about green-field SaaS providers that don't have an installed customer base to contend with? Well, manufacturing systems are not an easy place to start, as they are a super-set, to use Mark's term, of what's required for services businesses. Which may explain why the pure-play SaaS providers have started with the services sector.

Is Plex really pure SaaS? The term SaaS is thrown around so much these days, I wanted to ensure that Plex Online was a true multi-tenant system. Mark assured me that it is. The system was developed beginning in the year 2000, and all new features are implemented once in the system for all customers, who can choose to "opt in" to the new functionality according to their needs. Plex also allows a high degree of configuration for individual customers and provides a visual composition environment to allow customers to create their own custom displays and reports.

The Plex literature does not call attention to the technology platform, but I did determine that the system is built on Microsoft technologies. There is a Microsoft SQL Server database on the backend, with Active Server Pages as the original development platform. New functionality being developed in C#.net. Having started development ten years ago, the technology platform appears a bit of a hybrid and a bit dated in spots, in my view. But, it works.

Plex currently runs two instances of the system, for load balancing purposes--which is not uncommon among other SaaS providers, such as Workday. I was impressed that MS SQL Server is able to scale to this degree, with hundreds of customers on each instance, and Mark indicated that scalability has not been a problem. The client user interface is all browser-based, utilizing HTML, dHTML, Javascript, and XML. The hardware platform is all HP Wintel servers.

Support for large manufacturing organizationsI had heard from Plex's PR folks that the company has recently been having some success selling into larger organizations, over $1 billion in revenue. I was interested to find out whether these represented true multi-facility, multinational organizations, or whether these were merely plant-level implementations where a traditional on-premise vendor was handling the primary corporate requirements (i.e. a two-tier ERP strategy).

Mark assured me that some of these were complete ERP replacements (although Plex is working with some larger organizations in a two-tier ERP strategy as well). For example, Inteva Products is a company of 3,600 with 17 facilities on three continents. Originally a part of Delphi Interiors, it spun off in 2008 as a separate company. Looking to replace its SAP system, Inteva chose Plex Online. The implementation in 14 global locations took just twelve months. It's a good story and an "existence proof" that Plex can address companies of this size.

The challenge of international requirementsI've seen manufacturing firms struggle with systems that do not truly support multiple facilities for material planning and costing. Is Plex a true multi-facility system? Mark indicated that Plex does allow a single company to run a separate material plan for each plant and to transfer material between plants with correct accounting for costing methods that may differ between plants.

Multinational companies may need to set up multiple tenants within Plex, but these are to accommodate different tax and regulatory requirements (localizations) not for multi-facility requirements. On this point, I questioned how Plex, as a small vendor, was able to support localizations for so many international locations. Localizations are currently provided for Mexico, Canada, China, German, the UK, and Japan ("to some extent"). Mark's response indicated that localizations are handled on an opportunistic basis--when a customer needs them, they provide them with support from Plex's partners, such as Plante & Moran , BDO Seidman, and Baker Tilly.

Prospects considering Plex should not assume, therefore, that Plex can handle all international requirements. Be specific on what's required and be prepared for Plex to propose additional time to develop the localizations needed.

Dealing with medical device and pharma manufacturersI was especially intrigued by Mark's claim to be addressing the needs of life science companies. Based on my experience dealing with FDA regulatory requirements, I was interested to know if Plex was able to address buyer concerns about demonstrating control of system configuration. Normally, buyers have little or no say about how or when a SaaS provider makes changes to a multi-tenant system. Mark indicated success in this area, by giving customers the ability to "opt in" to system changes, as discussed earlier, and by submitting to customer qualification of Plex as an approved vendor. Plex's certification of its operations as compliant with SAS 70 Level II also helps.

My takeWhatever Plex is doing, it seems to be resulting in some good financial performance over the past three years. As a privately held firm, Plex does not publicly report performance. But Mark indicated 33% growth in the top line for 2008, 14% for 2009 and a good outlook for 2010. In a timeframe when nearly all on-premise enterprise software providers are showing negative license sales growth, Plex's results are outstanding.

Do I have any concerns about Plex as a provider? Only that buyers should check functional fit. Plex's roots are in the automotive industry, though it is now expanding into other areas such as life sciences, food and beverage, and aerospace/defense. The functional footprint may have some gaps, depending on the industry. Due diligence is always advised. The ability to support international requirements in specific locations should also be verified, as discussed earlier.

That said, I think Plex is on the right track. I only wish other SaaS providers would address the needs of the manufacturing industry.

Update, May 10: Fellow Enterprise Advocate Dennis Howlett provides his take on Plex. Dennis delves into many details I didn't go into, so please read his post.

I'm interested in hearing about best practices, lessons learned, horror stories, and case studies of success or failure.

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